Xerox Holdings Corp

The following is a summary of our liquidity position:

•As of September 30, 2024 and December 31, 2023, total cash, cash equivalents and restricted cash of Xerox Holdings Corporation were $590 million and $617 million, respectively, and apart from restricted cash of $69 million and $98 million at September 30, 2024 and December 31, 2023, respectively, was readily accessible for use. The decrease in total cash, cash equivalents and restricted cash of $27 million primarily reflects net cash used in financing activities of $149 million, as well as net cash used in investing activities of $26 million, both of which were partially offset by net cash provided by operating cash activities of $160 million.

•Total debt at September 30, 2024 was $3,271 million, of which $1,963 million is allocated to and supports the Company's finance assets. The remaining debt of $1,308 million is attributable to the non-financing business and increased from $849 million at December 31, 2023. Debt consists of senior unsecured notes, secured borrowings through the securitization of finance assets, and borrowings under a Term Loan B facility.

•In March 2024, Xerox Holdings Corporation issued $500 million of 8.875% Senior Notes due in 2029, as well as an aggregate $400 million of 3.75% Convertible Senior Notes due in 2030. In connection with the issuance of the 2030 Notes, the Company entered into privately negotiated capped call transactions, with the option counterparties, including certain of the initial purchasers of the 2030 Notes or their respective affiliates at a cost of approximately $23 million. A portion of the aggregate net proceeds were used to repay, via tender offer, approximately $84 million of the 3.80% Xerox Corporation Senior Notes due in 2024 and approximately $362 million of the 5.00% Xerox Holdings Corporation Senior Notes due in 2025. The remaining outstanding 3.80% Senior Notes that were not redeemed as part of the Senior Notes tender offer were repaid in May 2024. Approximately $388 million, which is the remaining portion of our 5.00% Senior Notes, is due in August 2025.

•In June 2024 we amended our ABL facility dated as of May 22, 2023, to (i) increase the commitments of the lenders under the ABL Credit Agreement from $300 million to $425 million and (ii) amend the excess availability used to trigger the fixed charge coverage ratio springing covenant from an amount equal to the greater of (A) $22.5 and (B) 10% of the Line Cap (the lesser of the aggregate amount of Revolving Commitments and the then-applicable Borrowing Base), to an amount equal to the greater of (A) $31.875 million and (B) 10% of the Line Cap. Refer to Note 13 - Debt in the Condensed Consolidated Financial Statements for additional information regarding debt activity.

•As of September 30, 2024, there were no borrowings or letters of credit outstanding under our ABL facility, under which we can borrow up to a maximum of $425 million. We were in full compliance with the covenants and other provisions of the ABL Facility.

•As a result of our lowered guidance, we now expect Operating cash flows for 2024 to be within a range of $490 million to $540 million, versus prior guidance of at least $600 million, reflecting the after-tax effects of the reduction in adjusted 1 operating income guidance. We now expect capital expenditures to be approximately $40 million, as compared to previous guidance of approximately $50 million.

Xerox 2024 Form 10-Q 63

Cash Flow Analysis

The following summarizes our cash, cash equivalents and restricted cash:

Cash Flows from Operating Activities

Net cash provided by operating activities was $160 million for the nine months ended September 30, 2024. The $137 million decrease in operating cash from the prior year period was primarily due to the following:

•$88 million decrease in pre-tax income before depreciation and amortization, provisions, gains on sales of businesses and assets, divestitures, PARC donation, stock-based compensation, goodwill impairment charge, restructuring and related costs, net and non-service retirement-related costs.

•$186 million decrease from inventory primarily due to higher purchases related to a change in contractual terms with a large OEM vendor and decreased sales of equipment and supplies.

•$94 million decrease from accrued compensation due to the timing of payments of higher year-end accruals.

•$53 million decrease from higher restructuring and related payments.

•$39 million decrease from higher pension contributions.

•$147 million increase from accounts payable primarily due to the timing of supplier and vendor payments.

•$77 million increase from other current and long-term liabilities due to timing of payments.

•$65 million increase from accounts receivable primarily due to the timing of collections.

•$31 million increase due to lower placements of equipment on operating leases.

Cash Flows from Investing Activities

Net cash used in investing activities was $26 million for the nine months ended September 30, 2024. The $29 million change from the prior year period was primarily due to noncontrolling investments as part of our corporate venture capital fund and lower proceeds from the sale of assets.

Cash Flows from Financing Activities

Net cash used in financing activities was $149 million for the nine months ended September 30, 2024. The $670 million decrease in the use of cash from the prior year period was primarily due to the following:

•$541 million decrease from share repurchases.

•$124 million decrease from net debt activity. 2024 reflects proceeds of $500 million on Senior Notes and $400 million on Convertible Senior Notes offset by net payments of $658 million on Senior Notes, deferred debt issuance costs of $18 million from Senior Notes issuances, $211 million on secured financing arrangements and $21 million on the Term Loan B facility. The $658 million of net payments on Senior Notes includes $300 million on Senior Notes maturing in May 2024 and $362 million for the early redemption of 2025 Senior Notes offset by early redemption premium of $4 million. 2023 reflects net proceeds of $549 million from the Loan Facility, used to fund the share repurchase, and $213 million from the ABL Facility, which include debt issuance costs payments of $6 million and $7 million, respectively, and net proceeds of $52 million from the refinance of our Canadian secured loan. These borrowings were offset by payments of $644 million on secured financing arrangements and $300 million on Senior Notes. The $644 million of payments on secured financing arrangements includes the early repayment of $185 million U.S. secured borrowing.

•$24 million decrease from common stock dividends due to lower outstanding shares.

•$23 million increase from purchases of capped calls.

Refer to Note 13 - Debt in the Condensed Consolidated Financial Statements for additional information regarding debt activity.

Xerox 2024 Form 10-Q 64

Cash, Cash Equivalents and Restricted Cash

Refer to Note 12 - Supplementary Financial Information in the Condensed Consolidated Financial Statements for additional information regarding Cash, cash equivalents and restricted cash.

Operating Leases

We have operating leases for real estate and vehicles in our domestic and international operations, and for certain equipment in our domestic operations. Additionally, we have identified embedded operating leases within certain supply chain contracts for warehouses, primarily within our domestic operations. Our leases have remaining terms of up to ten years and a variety of renewal and/or termination options. As of September 30, 2024 and December 31, 2023, total operating lease liabilities were $177 million and $182 million, respectively.

Refer to Note 10 - Lessee in the Condensed Consolidated Financial Statements for additional information regarding our leases accounted for under lessee accounting.

Debt and Customer Financing Activities

The following summarizes our debt:

(1)Represents secured debt issued by subsidiaries of Xerox Corporation as part of the securitization of Finance Receivables.

Refer to Note 13 - Debt in the Condensed Consolidated Financial Statements for additional information regarding debt.

Finance Assets and Related Debt

The following represents our total finance assets, net associated with our lease and finance operations:

(1)Includes (i) Billed portion of finance receivables, net, (ii) Finance receivables, net and (iii) Finance receivables due after one year, net as included in our Condensed Consolidated Balance Sheets.

(2)The change from December 31, 2023 includes a decrease of $11 million due to currency.

Xerox 2024 Form 10-Q 65

Our lease contracts permit customers to pay for equipment over time rather than at the date of installation; therefore, we maintain a certain level of debt (that we refer to as financing debt) to support our investment in these lease contracts, which are reflected in Total finance assets, net. For this financing aspect of our business, we maintain an assumed 7:1 leverage ratio of debt to equity as compared to our finance assets.

Based on this leverage, the following represents the breakdown of total debt between financing debt and core debt:

(1)Finance receivables debt is the basis for our calculation of "Cost of financing" expense in the Condensed Consolidated Statements of Income (Loss).

Sales of Finance Receivables and Third Party Leasing Programs

Refer to Note 8 - Finance Receivables, Net and Note 22 - Subsequent Events in the Condensed Consolidated Financial Statements for additional information regarding our sales of finance receivables and our third party leasing programs.

Capital Market/Debt Activity

Refer to Note 13 - Debt in the Condensed Consolidated Financial Statements for additional information regarding our debt activity.

Liquidity and Financial Flexibility

We manage our worldwide liquidity using internal cash management practices, which are subject to i) the statutes, regulations and practices of each of the local jurisdictions in which we operate, ii) the legal requirements of the agreements to which we are a party, and iii) the policies and cooperation of the financial institutions we utilize to maintain and provide cash management services.

Our principal debt maturities are spread over the next five years as follows:

(1)Represents secured debt issued by subsidiaries of Xerox Corporation as part of the securitization of Finance Receivables.

Refer to Note 13 - Debt in the Condensed Consolidated Financial Statements for additional information regarding debt.

Treasury Stock

Xerox Holdings Corporation made no open-market repurchases of its Common Stock during 2024.

Xerox 2024 Form 10-Q 66

Commitments

Technology

In the second quarter 2024, Xerox entered into a seven year agreement with Tata Consulting Services (TCS), for the purpose of consolidating Xerox’s technology services to improve business outcomes, migrate legacy data centers to the cloud, deploy a cloud-based digital ERP platform to transform business processes, and incorporate generative artificial intelligence (GenAI) into operations to help drive sustainable growth. The agreement expands Xerox's existing partnership with TCS, who currently provides business processing outsourcing services in support of our global finance and accounting organization; there were no changes to the terms of the business processing outsourcing services agreement. Xerox can terminate the arrangement with 90 days notice, subject to payment of a termination fee.

In connection with the technology agreement with TCS, Xerox also entered into seven year agreements with both SAP Limited (SAP), who will provide Xerox with a cloud-based digital ERP platform, and Microsoft, who will provide their Azure cloud platform services.

In the second quarter 2024, Xerox entered into a five year agreement with Verizon Business Services (Verizon) to provide their Network as a Service (NaaS) solutions framework as part of Xerox's Reinvention. Under the terms of the agreement, Verizon will provide a secure network platform solution delivering network services to Xerox business locations globally.

Shared Service Arrangement

In the third quarter 2024, Xerox entered into an agreement with HCL Technologies Limited (HCL), to renew and extend the original shared services arrangement contract, entered into in 2019, in which HCL provides certain global administrative and support functions to Xerox. In addition to the existing shared services arrangement, HCL will support Xerox's Global Business Services (GBS) organization with professional services support, sales efficiency, and remote problem-solving. Xerox can terminate the arrangement at any time starting in July 2025, subject to payment of termination fees that decline over the term, or for cause.

The approximate aggregate spending commitments are as follows:

(1)Represents all contractual arrangements between Xerox and the vendor as of September 30, 2024.

Xerox 2024 Form 10-Q 67